Reddit stock slumps after CEO Steve Huffman teases paywalled subreddits

Reddit earnings: Stock slumps, CEO Steve Huffman teases paywalled subreddits

Huffman floated the idea on an earnings call this week, but stopped short of giving a timeline for such a move.

BY Chris Morris

Reddit’s CEO is hinting that the social media site could explore some paid options for select subreddits now that it’s publicly traded.

On an earnings call Tuesday, Steve Huffman discussed potential exclusive areas as an additional way for the company to boost revenues, but stopped short of giving a timeline for the practice going into effect.

“I think the existing altruistic free version of Reddit will continue to exist and grow and thrive just the way it has, but now we will unlock the door for new use cases, new types of subreddits that can be built that may have exclusive content or private areas, things of that nature,” Huffman said.

That risks upsetting the always-opinionated Reddit community, which has revolted against Huffman’s decisions before (though those revolts have ultimately not had a significant impact on the company or the user numbers).

In a statement to Fast Company, a Reddit spokesperson said: “We’ve had versions of premium community features in the past, like r/goldlounge, that users loved, so we’re exploring new ways to empower moderators and communities to try exclusive spaces and content. We’ll let you know when we have more to share.”

While some future subreddits might be put behind a paywall, Huffman did not indicate that existing subreddits with established communities will see any changes. And he acknowledged that altering the existing formula for those channels could be harmful to Reddit.

“I think one of the truly special and, honestly, almost magical things about Reddit is the amount of time and effort people spend helping each other, giving advice, helping people through decisions, sometimes small decisions—what should I watch tonight—sometimes big decisions, like should I go through this breakup,” he said. “In my experience . . . whenever we add basically a new way of using Reddit, what happens is it expands Reddit, but we’ve not seen it cannibalize existing Reddit.”

Reddit has been open in its desire to boost its financials. After its IPO in March, the company struck deals with Google and OpenAI to help train their artificial intelligence systems. In the second fiscal quarter, the company reported better-than-expected numbers, with a loss of 6 cents per share (compared to analyst expectations of a loss of 33 cents per share) and revenue of $281 million, topping expectations by $33 million.

Despite that, shares of the company are down nearly 6% in midday trading on Wednesday. They’re up just 1.5% from their IPO price year-to-date, and are still well below the company’s 52-week high.

On the call, Huffman also spoke of incorporating artificial intelligence into Reddit, saying the company was using it to help improve internal search results. Search is a critical component of both attracting new users and retaining existing ones, but Huffman acknowledged it has not been changed “for a long time.

“Search on Reddit is a huge opportunity,” he said. “Many new users run a search. You’ve heard me talk about onboarding, helping connect users to their interests on Reddit. For many users, they’re literally typing into a box exactly what they’re interested in. So it’s, I think, a really important consumer product service area.”

He added that later this year the company will start to test search results powered by AI, which will summarize and recommend content. As with the paid subreddits, the company sees the AI search results as a potential source of additional revenue. Huffman once again did not give a more precise timeline on when the AI search tests would begin.

Note: This headline has been updated to avoid confusion around the relationship between Reddit’s stock and the CEO’s comments.

Reddit stock slumps after CEO Steve Huffman teases paywalled subreddits


ABOUT THE AUTHOR

Chris Morris is a contributing writer at Fast Company, covering business, technology, and entertainment, helping readers make sense of complex moves in the world of tech and finance and offering behind the scenes looks at everything from theme parks to the video game industry. Chris is a veteran journalist with more than 35 years of experience, more than half of which were spent with some of the Internet’s biggest sites, including CNNMoney.com, where he was director of content development, and Yahoo! Finance, where he was managing editor 


 

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